Banks gain from coal block can­cel­la­tions

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Supreme Court's cancellation of coal block al­lo­ca­tions in 2014 has thrown up an un­ex­pected op­por­tu­nity to the bank­ing sec­tor to re­cover part of their core sec­tor loans that has turned non-per­form­ing as­sets (NPA).

Banks like UCO Bank and State Bank of In­dia (SBI) have got the ap­proval of the coal min­istry to take away part of the com­pen­sa­tion payable by the new own­ers of such coal blocks to the prior own­ers as set­tle­ment of money in­vested by the lat­ter in de­vel­op­ments of the mines which were sub­se­quently de-al­lo­cated.

While UCO Bank has got hold of Rs 23.31 crore payable by the new owner JSW Steel to prior al­lot­tee Jayaswal Neco, SBI would re­ceive Rs 8.54 crore against loans to So­vais­pat and Jai Balaji Sponge, the erst­while joint own­ers of the block, let­ters is­sued by the min­istry re­vealed.

The banks, how­ever, are not get­ting back their full ex­po­sure to the spe­cific projects but only to the ex­tent the prior al­lot­tees had spend on land and mine in­fra­struc­ture.

The Kolkata-based UCO Bank had ex­tended the loan to Jayaswal Neco for the de­vel­op­ment of Moitra block. The ac­cepted claim un­der the Coal Mines (Spe­cial Pro­vi­sions) Rules comes to Rs 53.55 crore.

The money spent by Jayaswal Neco for the land has been cal­cu­lated at Rs 25.95 crore, of which Rs 2.64 crore has been held back be­cause of be­ing dis­puted. The bal­ance Rs 23.31 crore, due to Jayaswal Neco, would now be handed over to UCO Bank for part-set­tle­ment of its Rs 53.55 crore dues.

Sim­i­larly, SBI would be get­ting Rs 8.54 crore against Rs 10.59 crore given as loan for de­vel­op­ment of Ard­ha­gram coal block jointly owned by So­vais­pat and Jai Balaji Sponge.

“The ac­cepted claim of State Bank of In­dia against the said mine is Rs 10.59 crore. As per Sec­tion 9 of the said Act (Coal Mine Spe­cial Pro­vi­sion Rules 2014) read with Rules 15, the claim of the se­cured cred­i­tor is to be set­tled prior to the set­tle­ment of the claim of gov­ern­ment au­thor­i­ties. The amount available for re­lease is Rs 8.54 crore whereas the claim of se­cured cred­i­tor SBI is Rs 10.59 crore,” the let­ter is­sued by the coal min­istry said.

The gov­ern­ment in Septem­ber is­sued a mine-wise pro­vi­sional list of ad­mis­si­ble com­pen­sa­tion amount with re­spect to 35 coal mines. In June, claims from se­cured cred­i­tors like banks and also gov­ern­ment au­thor­i­ties were in­vited in re­spect of Sched­ule 1 mines. While banks and other gov­ern­ment agen­cies re­sponded with the claims against these 35 mines, the min­istry would be giv­ing pref­er­ence to the cred­i­tors.

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